December 01, 2010

U.S. Law Review Article Explains How Offshore Legal Outsourcing is Changing the Legal Landscape

By Sanjay Bhatia*

In what may be the most comprehensive and thoughtful articles on the topic of offshore legal process outsourcing ("LPO") in the last few years, Associate Professor Cassandra Burke Robertson of Case Western Reserve University School of Law has concluded that this trend is revolutionizing the way in which law is practiced in the West. "International legal outsourcing is reshaping the practice of law," says Professor Robertson, in her increasingly acclaimed, 59-page law review article, "A Collaborative Model of Offshore Legal Outsourcing." Professor Robertson suggests that for legal outsourcing to be effective, buyers of LPO services should "adopt a collaborative model that builds relationships" to avoid potential risks. A copy of the article can be downloaded here.

Using a particular and actual high-profile litigation in Los Angeles to demonstrate some of the most surprising and profound ways in which LPO services are shifting the legal landscape, Professor Robertson comments as follows:

Offshoring the defense in that case did not merely replace domestic legal services with a lower-cost alternative elsewhere; instead, it changed the nature of the defense entirely. It took a case that would likely have been handled outside the court system through a nuisance settlement and brought it within the formal adjudicatory system. As a result, the case was decided on the merits and the decision is publicly available, potentially discouraging further merit-less claims.

* * *

[I]nternational outsourcing can transform individual lawsuits, [and] it also demonstrates how outsourcing is quickly becoming a part of mainstream legal practice. Clients who experiment with outsourcing tend to continue their contracts and institutionalize the practice.

* * *

Given the rapid growth of transnational legal outsourcing—and the large cost-savings associated with that growth—it seems safe to say that outsourcing is not going away anytime soon. The legal profession will have to adapt to incorporate this new way of providing legal services.

Professor Robertson's views reflect the growing acceptance of the LPO industry among the Western legal community. Barely a decade old, offshore legal outsourcing was scoffed at initially, grudgingly accepted thereafter, and is now fast being accepted as a phenomenon that is here to stay. As Professor Robertson rightly points out, legal outsourcing received a major boost after being approved by the American Bar Association and numerous state and local bar associations. Professor Robertson's article also validates the view that legal outsourcing from the West to countries like India is not just confined to quasi-legal work such as filling out forms and transcribing depositions, but includes high-end, complex work such as legal research, drafting briefs, drafting contracts, and preparing drafts of patent applications. She points out that “[w]hile this higher-level legal work represents only fifteen percent of the LPO marked right now, it is quickly growing; as LPO firms become more established, they tend to take on increasingly more sophisticated work.”

Importantly, regarding the highly contentious and bitter complaint that legal jobs are lost in the U.S. because they are outsourced, Professor Robertson concludes otherwise. She cites facts to support her point that offshore legal outsourcing "creates more jobs than it eliminates... [and] the cost savings achieved from offshoring lower-level work may create more high-end jobs onshore." Not only do I agree, but I would further add that even the offshoring of high-value work creates job opportunities in the West. I have seen in my own experience how this kind of outsourcing creates more legal work in the West, not less. Deals previously undone, and litigations previously settled (or never filed), due to previously excessive legal costs, become suddenly affordable. Affordability means more work for the Western lawyers involved in supervision, editing, negotiating, and/or appearing in court.

Professor Robertson also stakes out a position different from several recent legal commentators, by cautioning against the increasingly prevalent trend of "disaggregation," i.e., where "discrete tasks [are] carved out of the overall legal representation" and outsourced. She argues that this can lead to diffusion of responsibility among the various service providers, a problem that is magnified when work is sent outside the country. Professor Robertson acknowledges that while outsourcing part of a larger assignment per se amounts to its disaggregation, the risks can be minimized by a collaborative approach between the service provider and its client, where the focus is on "cooperation, communication and negotiation of status and resources."

Professor Robertson's article obviously is a result of thorough research, and it is supported by 327 footnotes. It signals the growing acceptance of the LPO industry, not only in the commercial world of corporate clients and law firms, but also among legal academia. Today, LPO is a robust, established industry. Though not as big as the software industry, it has reached a stage where there is no turning back. The end consumers of legal services, be they individuals, law firms, or corporations, are realizing the benefits. Corporations in particular have begun to mandate their attorneys and law firms to leverage offshore talent at LPO companies. This is the reason why even the large law firms, some of which are among the AmLaw 100 and the UK's "Magic Circle," and which otherwise would be the last to even consider offshore legal outsourcing, are now engaging in it.

The bottom line, of course, is to get more "bang for the buck," without any compromise in quality. However, it is perhaps the disaggregation of legal tasks, resulting in most LPOs performing only a fraction of the overall legal job at hand, which has led to the perception that LPO companies do only low-end, "grunt" work, or in other words, "the chore, but not the core." There may be some truth in this, but it does not reflect the entire reality. As Professor Robertson's notes in her article, there are several offshore legal outsourcing companies, though few in number, and sometimes smaller in size, which do cutting-edge work that requires immense legal, analytical, and writing skills.

Professor Robertson's article also coincides with some noteworthy developments in the LPO field that may signal the beginning of a phase of both consolidation and continued expansion. Recently, the Gurgaon-based LPO, UnitedLex, acquired another player in the LPO market, LawScribe. Until then, the only other notable acquisition in the industry was Mysore-based Software Paradigms (India) Ltd. ("SPI") taking over the entire LPO business of another local player, Comat Technologies, in late 2007. Soon after this month's UnitedLex/LawScribe transaction, the industry was witness to another acquisition that made UnitedLex's buy seem relatively small: the Thomson Reuters acquisition of a 100% stake in Pangea3, arguably India's largest pure-play LPO in terms of both personnel and turnover.

The Thomson deal is significant, not just because of its speculated but unconfirmed size of $35-100 million, but - more importantly – because the world's largest legal publisher has put its money into offshore legal outsourcing, which perhaps it sees as the future of the legal industry. Thomson's acquisition is bound to silence many of the LPO naysayers in the West, who have repeatedly predicted the downfall of the industry, wishfully but ignorantly regarding it as a passing fad. To the contrary, The Thomson deal is also likely to result in other big names in the legal industry investing in LPO. As Professor Robertson correctly noted in her prescient article, offshore legal outsourcing seems destined to "reshape the practice of law."

-----------

* Sanjay Bhatia is Head of Operations at SDD Global Solutions, one of India's leading providers of high-end legal outsourcing services, and the only Indian legal outsourcing company managed by a U.S. law firm. He is a graduate of India's top-ranked National Law School. SDD Global has offices in Mysore, Bangalore, New York, and London. SDD Global recently ranked as the #1 outsourcing company in India, and #2 in the world, out of over 2,700 companies evaluated, according to the 2010 survey of 6,547 clients by The Black Book of Outsourcing.

Comments

You can follow this conversation by subscribing to the comment feed for this post.

What usually happens with outsourcing is a lot of back-office functions that rarely, if ever, require any expertise.